BySteven Bodzin, CorrespondentJanuary 12, 2011

Santiago, Chile — Two people in the southern Chilean city of Punta Arenas were killed Tuesday night when a truck ran into the barricade where they were protesting the government's plan to increase natural gas prices.

The world's southernmost city, with a population of 110,000, remained largely paralyzed today by a general strike as local residents and elected officials demand that the national government maintain subsidies on natural gas, which is widely used in the region to power vehicles, heat homes, and provide energy for businesses.

The protests are the latest in a wave of anger in Latin America as governments attempt to reconcile budgets with energy prices, which have climbed to levels not seen since the record highs of 2008.

Likewise in Chile, which imports 93 percent of its gas, analysts expect President Sebastián Piñera may have to back down from the planned 17 percent hike in natural gas prices as the strike in Punta Arenas and the surrounding region of Magallanes threatens to become his biggest crisis since taking office a year ago.

Indeed, government spokeswoman Ena Von Baer told reporters this morning that the administration is open to adjusting its plan but didn't want to do so under threat of strikes and violence. "We want dialogue, to continue talking in a serious and responsible way about the future of Magallanes," she said.

The government is painting the price increase as a technical decision in response to declining reserves of gas. Tomas Mosciatti, a pundit with Radio Biobio, said today on CNN Chile that any decision about subsidies – be it for the government to take on the burden, or to push it onto citizens – will have political repercussions.

Chile has been cutting subsidies to its national energy company, Enap, which in turn has laid off 600 workers in recent weeks and raised fuel prices. Gasoline and diesel in this import-dependent country now cost more than fuel in the US. Gas here is now more than $5 a gallon.

Chile's energy costs are compounded in Magallanes, where citizens pay the same average gas bill as consumers in the more temperate center of the country, about $45 a month, while consuming eight to ten times as much gas, Energy Minister Ricardo Raineri told Radio Cooperativa on Jan. 6.

The price increase will be only $6 a month for the average consumer, he said, but this threat was still enough to rile citizens in Magallanes. The region, which has Chile's only producing natural gas wells, is especially susceptible to increases in natural gas prices because many of the area's motor vehicles run on natural gas.

Strike forces arriving tourists to walk from airport

In Punta Arenas, truckers blocked the port yesterday and residents erected barricades overnight to enforce a general strike. Tourists arriving by airport at the peak of the southern summer must walk into the city, and access is blocked to the Torres del Paine national park in Patagonia, reported Radio Agricultura. Ferries to and from the island of Tierra del Fuego were halted by residents there.

Police detained 31 people overnight for alleged looting and vandalism. The driver of the vehicle that killed the two women, ages 19 and 23, and gravely injured a 2-year-old girl is still at large, Radio Polar reported. Political motivation for the accident has not been ruled out nor confirmed.